Last week, the Western Australia government released its state budget which included three changes which Leon Mok, managing director of Pitcher Partners Perth, believes could undermine the fragile recovery of the economy.

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First is the introduction of a tiered gold royalty rate from 1 January 2018 and the scaling back of the gold royalty exemption to raise an additional $392 million in royalty revenue.

Speaking to Accountants Daily, Mr Mok explained that the state relies mainly on iron ore royalties for its royalty income and this is projected to dip in the next few years. However, the gold sector is projected to keep doing well, so the government is trying to supplement their royalty income with increased gold royalties.

“The danger with this strategy is the message it sends to the broader market in terms of project investment. Investors and companies do not like the rules to be changed once their projects are starting to do well,” he said.

“WA relies on being an attractive place for investment into resources projects. It needs to manage the signals it sends to investors carefully at a time when the state is beginning to show signs of recovery from the mining downturn.”

The second change Mr Mok highlighted as concerning is the increase to marginal payroll tax rates to 6 per cent and 6.5 per cent for payrolls above $100 million and $1.5 billion respectively from the current flat 5.5 per cent pay roll tax.

“This is an attempt to supplement falling payroll tax revenues by tapping the largest and most successful WA businesses,” Mr Mok said.

“WA already has high payroll tax rates compared to the rest of Australia and this measure adversely impacts on the WA’s image as a place to do business.”

The third change is the introduction of a new 4 per cent duty surcharge on purchases of residential property by foreigners.

“This measure is a little difficult to fathom. In terms of pure revenue dollars raised, it is minor. There is also no justification in the measure as a move to quell an overheated housing market as there is in the eastern states,” Mr Mok said.

“WA had an opportunity to differentiate itself from the eastern states by not introducing an increase. This would have helped signal to the market that WA was open to foreign investment into the residential property sector, which is something that would help struggling local developers and building and construction businesses.”